Cleaner, greener energy and the future of oil
When it comes to the energy sector, things have certainly begun to change. Wind and solar energy sources are rapidly increasing, and US President Joe Biden aims to invest a huge sum of money in rectifying climate change and green energy, in his budget plans.
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- green energy
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If you’re considering oil trading on Plus500 for example, then opening a trade with a contract for difference (CFD) is something to consider. With so many uncertainties to what the future holds for oil, you can speculate on the price movement of the commodity, without owning the underlying asset itself.
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With this in mind, let’s take a look at the rise of green energy and how it may affect the oil industry.
Transition away from the oil industry
It appears that the transition to cleaner energy is inevitable, as majority of the world’s nations are pledging to achieve net zero carbon emissions by 2050. The uncertainty surrounding this is whether there will be a slow and gradual pivot, or it will happen suddenly and much sooner than predicted. A report from the International Energy Agency (IEA) expects the decline in demand for oil to come into effect 10 years earlier than previously assumed, with a high fall in crude oil predicted to happen by 2030.
In terms of giant producers in the oil industry, it seems going forward, that they will in fact diversify into renewable energies. BP plc have committed to invest 40% in renewables by 2030, while Total Energies have diversified through a $2.5 billion investment and acquirement of 20% interest in the one of the world’s largest solar developer, Adani Green Energy.
Shell Energy Retail Limited (Shell) have also recently announced that they will be reducing greenhouse gas emissions much earlier than initially planned. However, despite these steps, the company believe that there will still be a demand for oil, as well as an interest in investment in the oil and gas businesses.
On a post on LinkedIn, Ben van Beurden, Chief Executive Officer at Shell stated that:
“For a long time to come we expect to continue providing energy in the form of oil and gas products both to meet customer demand, and to maintain a financially strong company.
“We need this financial strength to keep attracting investment in Shell. So, we can deliver the energy the world needs, invest in lower-carbon energy and support… our customers, employees and contractors.”
So, although the value of the commodity itself may fall, due to the lack of demand in coming years, investors may still trade in the shares of these companies from the oil industry, as they in turn, commit to more renewable energy.
A shift in skills
Another aspect to consider is the job prospects and security of the oil industry, as the green energy sector expands. This could affect the prosperity and economy of the relevant nations, when it comes to trading, as well as the share prices of the companies in question.
According to an academic study conducted by Robert Gordon University there will plenty of job prospects from the UK’s low carbon energy industry, as it predicts that it will make up the majority of the offshore energy production by 2030. The study also states that the skills from the roles in the oil and gas sector will be transferrable to the those in green energy.
However, there have been opposing responses from other reports and studies surrounding the topic of jobs in the energy sector. One report from ‘Clean Jobs, Better Jobs’ found that jobs in the clean energy sector may come with better benefits and pay just as well as those in the fossil fuel business. On the other hand, a study by North America’s Building Trades Unions found that there is more variety, opportunities, development and consistency in the oil and gas jobs, compared to corresponding jobs in the clean energy industry.
As the debate fairs between the two workforces, it begs the question of the prosperity of the companies for either type of energy, and from an investors point of view, whether that reflects on the likely growth of the company and the value of its shares.